The NASDAQ Composite set a new 13 year high on Friday before profit taking caused the index to close lower for the day. Look for another period of consolidation now as doubts about the robustness of the economy emerge. Friday's housing news (existing home sales fell 5.1% in January, housing starts fell 16% month-on-month, mortgage applications dropped 4.1% from last week, home builder confidence fell) was disappointing but seen in the context of the bleak weather experienced across much of the  country, there is no reason to be alarmed.


I've changed the format  of the newsletter to now include a complete list of the week's breakouts. As you can see, there were several big performances led by SSTK which broke out from our new Squeeze Play watchlist. Unfortunately you would have needed inside information to profit from it, as it gaped up 15% following the previous evening's earnings  report. Another strong performer was ACAD which broke  out from a CwH pattern with squeeze. More about that below.

Cup-with-Handle Squeeze-Off Price

A new column was added to the  cup with handle watchlist called "Squeeze-off Price". This  is the price that the stock must rise to for the squeeze to come off. In other words its the price that will move the upper Bollinger Band above the upper Keltner Channel. Usually, this price is above the CwH pivot, or breakout price, and leads to a stronger and more successful breakout.

This will become clearer when you read the next section.
 

"Squeeze Off" Cup-with-Handle Breakouts

My analysis of breakouts from a cup-with-handle (CwH) pattern over the last five years shows that breakouts are more likely to be confirmed  when the normal breakout occurs when the squeeze comes  off. This occurs more rarely, but when it does this leads to a successful breakout 75% of the time.

One would play these "Squeeze-Off" breakouts by acting when the intraday price hits the squeeze of price.

ACAD's breakout on Friday illustrates what I mean. In  this case, the squeeze-off price was 24.68 and lower than the pivot, so the trade could have been entered earlier the the usual  BoP giving a greater profit potential. Why was the squeeze-off price less than the pivot? That's because the squeeze started before the pivot was formed, which will not usually be the case.



GTN provides another example